Spartan Motors Reports Record 2002 Earnings, Sharply Higher Fourth-Quarter Sales and Earnings
Strength in motorhome and emergency-rescue markets, operating enhancements
drive improved results
CHARLOTTE, Mich., Feb. 13 -- Fueled by operating
improvements and strength in its core RV and emergency-rescue markets,
Spartan Motors, Inc. today reported sharply higher sales and
net earnings in the fourth quarter and record net earnings for the year ending
Dec. 31, 2002.
The Charlotte, Mich.-based manufacturer of motorhome chassis, fire truck
chassis and emergency vehicles said 2002 fourth-quarter net earnings increased
22.7 percent to $2.2 million, or $0.18 per diluted share, compared with net
earnings of $1.8 million, or $0.17 per diluted share, in last year's fourth
quarter. The 2002 earnings per share results reflect a 16.3 percent increase
in weighted average diluted shares over the prior-year period, due primarily
to an additional 1.3 million shares outstanding as a result of the exercise of
options by Spartan associates over the past year. The 2001 fourth-quarter
results include a gain of $116,000, or $0.01 per share, related to the
Company's discontinued school bus operation.
Spartan said sales increased 19.0 percent to $63.4 million in the fourth
quarter of 2002, compared with sales of $53.3 million in the same period a
year ago. Spartan attributed the growth to strong performance at its Spartan
Motors Chassis unit, which manufactures custom motorhome and fire truck
chassis for original equipment manufacturers. Motorhome chassis sales were up
36.2 percent versus the year-ago quarter, Spartan said.
For the full year, Spartan reported net earnings of $11.7 million, or
$0.97 per diluted share, on sales of $259.5 million in 2002, compared with net
earnings of $6.1 million, or $0.58 per diluted share, on net sales of $226.3
million in 2001. The results include gains of $0.02 per diluted share in 2002
and $0.01 in 2001 related to the discontinued school bus unit. On a year-
over-year basis, Spartan's 2002 net earnings grew 90.9 percent, and earnings
per diluted share increased 67.2 percent versus 2001. Operating income
improved 58.3 percent, reflecting higher sales, improvements in productivity
and increased efforts to manage operating costs, as well as a significant
reduction in warranty costs.
"I am pleased with our results, particularly our ability to grow
profitably during a sluggish economy," said John Sztykiel, chief executive
officer of Spartan Motors. "I am especially pleased to report that our
efforts to streamline operations in 2002 resulted in a record-breaking year
from a net earnings standpoint.
"In 2002, we were able to accomplish several key business objectives: We
increased sales, improved overall product quality, increased our efficiency,
generated cash and strengthened our balance sheet. In sum, we enhanced
Spartan Motors' long-term value by executing on our business plan, all while
delivering a one-of-a-kind experience to our customers. Each and every one of
Spartan's 750 associates deserves credit for our performance and for their
contributions to our primary business objective -- to make Spartan Motors the
most-desired brand and the lowest total-cost producer in its market niches."
Fourth-Quarter Operating Highlights
Spartan Motors said higher sales, increased operating leverage and a
substantial reduction in interest expense all contributed to the strong
improvement in net earnings versus the year-ago fourth quarter. Spartan said
the gains were partially offset by expenses related to new product launches,
the ramp up of its new ambulance manufacturing facility in South Carolina and
the consolidation of its fire-truck manufacturing units during the fourth
quarter of 2002.
Consolidated gross profit increased 15.6 percent to $10.7 million in the
fourth quarter of 2002. The Company reported gross margin for the fourth
quarter of 2002 was 16.9 percent, compared with 17.4 percent in the fourth
quarter of 2001. Spartan attributed the decline in gross margin primarily to
the launch of its new Gladiator Evolution fire truck chassis, as well as
expenses related to the consolidation of its fire truck unit, which now
operates as Crimson Fire. The Company said continued improvement in overall
manufacturing efficiency and lower warranty costs helped offset the impact of
the chassis launch and Crimson Fire consolidation costs.
Operating income increased 43.5 percent to $3.2 million, reflecting higher
sales and continued focus on managing operating expenses. Consolidated
operating margin increased to 5.0 percent of sales, compared with 4.2 percent
in the fourth quarter 2001, despite higher fourth quarter 2002 investment in
R&D and marketing, as well as higher insurance costs, severance costs related
to the fire truck consolidation and incentive compensation expense. The
Company also reduced its interest expense by 72.7 percent compared with last
year, due mostly to Spartan's elimination of its long-term debt. Spartan paid
down more than $11.4 million in long-term debt in 2002.
"Our operating improvements over the past two years are encouraging, but
that is in the past and we are now focused on 2003," Sztykiel said. "We
believe our core markets are strong and will grow over the long-term, but we
are cautious about the near-term in these markets, particularly the motorhome
market. As such, we have taken a very aggressive stance on managing operating
expenses and will further sharpen our focus on operating improvements.
"We have several opportunities to improve efficiency and reduce
manufacturing costs in the near term. The consolidation of our fire truck
companies into Crimson Fire, the launch of our new fire truck chassis and the
ramp up of our new Road Rescue ambulance manufacturing facility represent
challenges for the short-term, but opportunities for the long-term. On a
company-wide basis, we are also increasing our focus on production efficiency
and workflow, reducing waste and managing inventory more effectively."
Spartan Chassis
Spartan Motors said sales of its custom motorhome chassis increased 36.2
percent compared with last year's fourth quarter, reflecting growth in the
diesel-pusher segment of the Class "A" RV business. Spartan said sales of its
highline motorhome chassis, which feature at least 330 horsepower engines,
improved 208.6 percent versus the last year's fourth quarter.
"The RV industry had a strong year in 2002, despite the overall economy,"
Sztykiel said. "We were able to outpace the RV market by offering innovative
products and superior service. In 2003, we need to leverage our investments
in marketing, sales and R&D to increase our penetration among the motorhome
OEMs and build market share."
Spartan said it received a strong reception for new products and service
initiatives introduced at the December 2002 Recreational Vehicle Industry
Association (RVIA) trade show. Spartan premiered several new custom motorhome
chassis, including its innovative mid-engine chassis, the Me2, as well as a
variety of new sales tools and training for motorhome dealers. Following
RVIA, Spartan helped introduce to the consumer market the new Travel Supreme
coach featuring the Me2 chassis, garnering coverage on CNNfn, CNBC, Financial
Times, USA Today and other print and broadcast media around the country.
Spartan said sales of its fire truck chassis were lower than last year's
fourth quarter. The Company said its launch of the new Gladiator Evolution,
which was designed to meet new engine emission standards, ramped up slowly to
ensure quality and delivery requirements were met. Spartan said strong 2002
orders of its entire line of fire truck chassis will contribute to sales over
the first few quarters of 2003.
Emergency Vehicle Team (EVTeam)
Spartan reported sales also decreased at its EVTeam unit, which makes fire
trucks, ambulances and other emergency vehicles. The EVTeam reported improved
gross margin versus last year's fourth quarter, reflecting improved
productivity and increased focus on reducing waste. Spartan said the EVTeam
also increased its investment in new product development in the quarter.
Spartan Profit And Return (SPAR)
The Company generated $15.9 million in cash flow from continuing
operations in the 2002 year, reflecting improved execution of the Company's
Spartan Profit and Return (SPAR) economic value-added financial model.
Spartan said it consistently improved production lead times and inventory-
management efforts throughout 2002, noting that year-end inventory was higher
than at the end of the third quarter due primarily to strategic purchasing of
necessary components at year-end. Spartan Motors said its cash conversion
cycle improved 18.5 percent over 2001, despite higher sales levels. On a
consolidated basis, Spartan posted a return on invested capital of 15.4
percent in the 2002 fourth quarter and 20.1 percent in the 2002 year.
"Everyone at Spartan Motors is learning to use SPAR as an important tool
to help improve cash flow, reduce working capital and increase profitability,"
said Jim Knapp, chief financial officer. "Additionally, we have enhanced our
capabilities in the areas of market and business analysis. These new
resources are allowing Spartan Motors to react quickly to changes in the
market and target areas of the business for increased investment and, as
appropriate, decreased expense. As conditions change in our core markets, we
will be very aggressive at managing operating expenses throughout 2003."
Spartan Motors reported consolidated backlog was $75.3 million as of
Dec. 31, 2002, comparable to the backlog levels at the end of 2001. Spartan
said the number of units in backlog decreased 16.6 percent, reflecting the
trend toward higher-margin units that feature more content and benefits.
"Overall, we are pleased with our current backlog, considering the state
of the economy in general," Sztykiel said. "Numerous companies have reported
lower backlogs at this time when compared to last year. Our efforts to
differentiate ourselves in this area are bearing fruit."
Sztykiel concluded: "We are approaching 2003 cautiously, but with
confidence. While the markets we serve are experiencing some short-term
change, we have positioned Spartan Motors to react to change and to react from
a position of strength. We will continue to invest in innovation, marketing
and customer service in order to increase our market share -- not by buying
it, but by taking market share. Our drive is to increase sales by out-
executing the competition -- without ever losing our focus on delivering a
great customer experience, quality products and bottom-line profitability."
About Spartan Motors
Spartan Motors, Inc. (http://www.spartanmotors.com ) is a leading developer and
manufacturer of custom chassis for recreational vehicles, fire trucks,
ambulances and other specialty vehicles. The Company also owns fire and
rescue vehicle manufacturers Crimson Fire, Inc. and Road Rescue, Inc.
The statements contained in this news release include certain predictions
and projections that may be considered "forward-looking statements" by the
securities laws. These forward-looking statements are identifiable by words
or phrases indicating that the Company or management "expects" or "believes"
that a particular result may occur, or similar statements. These statements
involve many risks and uncertainties that could cause actual results to differ
materially, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets,
products, services and prices. Additional information about these and other
factors that may adversely affect these forward-looking statements are
contained in the Company's reports and filings with the Securities and
Exchange Commission. The Company undertakes no obligation to update or revise
any forward-looking statements to reflect developments or information obtained
after the date of this news release.
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Income Statements
Three Months Ended December 31, 2002 and 2001
December 31, 2002 December 31, 2001
$-000- % $-000- %
Sales 63,428 53,282
Cost of Sales 52,701 44,005
Gross Profit 10,727 16.9 9,277 17.4
Operating Expenses:
Research and Development 1,747 2.8 1,534 2.9
Selling, General and
Administrative 5,799 9.1 5,527 10.3
Total Operating Expenses 7,546 11.9 7,061 13.2
Operating Income 3,181 5.0 2,216 4.2
Other Income (Expense):
Interest Expense (47) (0.1) (172) (0.3)
Interest and Other Income 99 0.2 172 0.3
Total Other Income (Expense) 52 0.1 - 0.0
Earnings before Equity Investment
and Taxes 3,233 5.1 2,216 4.2
Taxes 1,012 1.6 522 1.0
Net Earnings from Continuing Ops. 2,221 3.5 1,694 3.2
Discontinued Operations:
Gain (Loss) on Closure-Carpenter - 0.0 116 0.2
Net Earnings 2,221 3.5 1,810 3.4
Basic Net Earnings per Share:
Net Earnings from Continuing
Operations 0.18 0.16
Gain from Discontinued Operations:
Gain on Disposal of Carpenter - 0.01
Basic Net Earnings per Share 0.18 0.17
Diluted Net Earnings per Share:
Net Earnings from Continuing
Operations 0.18 0.16
Gain from Discontinued Operations:
Gain on Disposal of Carpenter - 0.01
Diluted Net Earnings per Share 0.18 0.17
Basic Weighted Average Common Shares
Outstanding 12,013 10,624
Diluted Weighted Average Common
Shares Outstanding 12,505 10,752
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Income Statements
Year Ended December 31, 2002 and 2001
December 31, 2002 December 31, 2001
$-000- % $-000- %
Sales 259,527 226,263
Cost of Sales 213,530 189,478
Gross Profit 45,997 17.7 36,785 16.3
Operating Expenses:
Research and Development 7,152 2.8 6,210 2.7
Selling, General and
Administrative 21,531 8.2 19,637 8.8
Total Operating Expenses 28,683 11.0 25,847 11.5
Operating Income 17,314 6.7 10,938 4.8
Other Income (Expense):
Interest Expense (348) (0.1) (1,375) (0.6)
Interest and Other Income 438 0.1 337 0.2
Total Other Income (Expense) 90 0.0 (1,038) (0.4)
Earnings before Equity Investment
and Taxes 17,404 6.7 9,900 4.4
Taxes 5,969 2.3 3,885 1.7
Net Earnings from Continuing Ops. 11,435 4.4 6,015 2.7
Discontinued Operations:
Gain (Loss) on Closure-
Carpenter 270 0.1 116 0.0
Net Earnings 11,705 4.5 6,131 2.7
Basic Net Earnings per Share:
Net Earnings from Continuing
Operations 1.00 0.57
Gain from Discontinued
Operations:
Gain on Disposal of
Carpenter 0.02 0.01
Basic Net Earnings per Share 1.02 0.58
Diluted Net Earnings per Share:
Net Earnings from Continuing
Operations 0.95 0.57
Gain from Discontinued
Operations:
Gain on Disposal of
Carpenter 0.02 0.01
Diluted Net Earnings per Share 0.97 0.58
Basic Weighted Average Common
Shares Outstanding 11,525 10,561
Diluted Weighted Average Common
Shares Outstanding 12,013 10,616
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2002 December 31, 2001
$-000 $-000
ASSETS
Current assets:
Cash and cash equivalents $8,082 $4,193
Accounts receivable, net 28,823 25,775
Inventories 25,205 23,588
Other current assets 4,751 5,396
Current assets of discontinued
operations 307 1,538
Total current assets 67,168 60,490
Property, plant and equipment, net 15,155 11,288
Goodwill, net 4,543 4,543
Other assets 1,446 1,291
Total assets $88,312 $77,612
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $15,940 $13,850
Other current liabilities and
accrued expenses 2,202 2,232
Accrued warranty 2,768 3,510
Taxes on income 1,412 1,241
Accrued vacation, compensation
and related taxes 5,449 2,859
Deposits from customers 4,098 3,807
Current portion of long-term
debt - 2,005
Current liabilities of
discontinued operations 9 1,796
Total current
liabilities 31,878 31,300
Long-term debt, less current portion - 9,400
Shareholders' equity:
Preferred stock - -
Common stock 120 107
Additional paid in capital 30,776 21,134
Retained earnings 25,538 15,671
Total shareholders'
equity 56,434 36,912
Total liabilities and shareholders'
equity $88,312 $77,612